Banks Stake Out Similar Growth Strategies, But Fall Short of Customer Focused Ambitions

New SAP study finds that banks aren't meeting their own IT expectations

By Nancy FeigNearly eight out of every 10 retail banks surveyed are pursuing similar growth strategies, critically limiting their ability to achieve competitive differentiation, according to a new global survey.

Banks are falling short of ambitious aims to power these strategies through keen customer insight and see a shift toward standard platforms and service-oriented architecture (SOA) as part of the solution, according to the "Global Retail Banking Benchmark" survey, conducted by the Paris-based European Financial Management & Marketing Association (EFMA) and SAP AG (Walldorf, Germany).

The study of 366 bankers from 180 retail banks across 44 countries suggests that one key to success for retail banks lies in outpacing peers in business intelligence and business agility through better application of flexible and scalable IT systems. The findings of the annual survey, now in its fourth year, were presented at the EFMA conference, held recently in Lisbon, Portugal.

"Banks are well-advised to take a closer look at why they have not met their expectations of the last surveys," said Patrick Desmarès, secretary general of EFMA. "With eight out of 10 banks pursuing the same strategy driven by customer insight, gaining competitive edge will mean being able to follow through on initiatives to improve customer information systems. These annual studies create discussion and debate across the industry and across borders, and it is great to see the study's impact growing every year."

The study's results indicate that bank executives still seek to tap the value of gathering, analyzing and retrieving relevant data on customers and customer segments. However, in comparison to results of prior surveys, banks are still far from where they anticipated they would be today:

• When surveyed in 2003, 57 percent of retail banks expected to be performing regular and consistent analysis of customer data by 2007; only 20 percent now make the mark.

• The current study revealed that a mere 14 percent of banks claimed that they are making full use of customer segmentation strategies, an increase from only 7 percent in 2004.

To underpin business intelligence initiatives, a majority of banks surveyed will continue to use both in-house systems and standard software, as the latest study shows. However, the proportion of those using primarily standard software will increase from 11 percent to 27 percent over the next three years. Survey results revealed:

• The percentage of participants viewing their current IT infrastructure as a strategic disadvantage grew to 46 percent this year, from 36 percent in 2004.

• In the first year of the survey, nearly all banks expected to have some automation of front-line tools. However, in this year's survey, only 60 percent of banks reported gains in partial automation. The rest reported either irregular automation or none at all.

• Nearly 80 percent of banks see a shift towards standard platforms, driven by developments in service-oriented architecture and increased regulation. "Offering valuable insight into the changing business demands of the banking sector, these surveys and our expansive collaboration with EFMA underline the growing leadership role and industry expertise that uniquely qualifies SAP to offer industry-specific solutions to banks and financial institutions across the globe," said Thomas Balgheim, head of SAP's global Banking line of business. "The results of this survey and our continuing dialogue with customers underline banks needs for business model innovation and reveal the value of the infrastructure improvements. For our customers, we are addressing these demands through enterprise SOA, helping banks build a business process platform for competitive differentiation and business growth."